1

Introduction

Even while concentrating on the traffic, drivers on routine automobile trips to work listen to the radio, think about the day ahead, or perhaps just daydream. The traffic moves at its normal pace. Drivers accustomed to the same route make their usual turns or lane changes. Jangling radio commercials interweave with the Top Forty. But the lane ahead is suddenly a long string of glowing red taillights. Hearts sink. Congestion. Blood pressures rise. Delay. Traffic slows to a standstill. . . . Perhaps this time it's a minor problem that will clear up shortly, but after five minutes of creeping along, hope gives way to anxiety about being late. After ten minutes, anxiety gives way to anger about the wasted time and work schedules disrupted.

This story sounds familiar to us all. Millions of drivers endure frustrating delays every day. Viewed from a helicopter hovering above the Bay Bridge in Oakland and as far as the eye can see, cars creep along 12 lanes of incoming traffic during the morning peak period. The traffic queues south of Washington, D.C., where Interstate 95 meets the Capital Beltway can stretch for 35 km (22 mi) during peak-hour traffic jams. Even before the 1994 earthquake, the “rush hour” on the Santa Monica Freeway lasted all day. The peak morning and evening traffic flow on the Long Island Expressway can be measured in inches per minute.

Congestion not only is frustrating, it is costly. The biggest single expense of congestion is motorist time lost because of delay, but stop-and-go traffic also wastes fuel. The cost of delay in U.S. urban areas, based on estimates of motorist value of time and wasted fuel, totaled $43 billion in 1990 (Shrank et at. 1993). The cost would rise even more if it included the increased air pollution from the emissions of idling and accelerating engines that accompany stop-and-go traffic. These figures also do not mea-



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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion 1 Introduction Even while concentrating on the traffic, drivers on routine automobile trips to work listen to the radio, think about the day ahead, or perhaps just daydream. The traffic moves at its normal pace. Drivers accustomed to the same route make their usual turns or lane changes. Jangling radio commercials interweave with the Top Forty. But the lane ahead is suddenly a long string of glowing red taillights. Hearts sink. Congestion. Blood pressures rise. Delay. Traffic slows to a standstill. . . . Perhaps this time it's a minor problem that will clear up shortly, but after five minutes of creeping along, hope gives way to anxiety about being late. After ten minutes, anxiety gives way to anger about the wasted time and work schedules disrupted. This story sounds familiar to us all. Millions of drivers endure frustrating delays every day. Viewed from a helicopter hovering above the Bay Bridge in Oakland and as far as the eye can see, cars creep along 12 lanes of incoming traffic during the morning peak period. The traffic queues south of Washington, D.C., where Interstate 95 meets the Capital Beltway can stretch for 35 km (22 mi) during peak-hour traffic jams. Even before the 1994 earthquake, the “rush hour” on the Santa Monica Freeway lasted all day. The peak morning and evening traffic flow on the Long Island Expressway can be measured in inches per minute. Congestion not only is frustrating, it is costly. The biggest single expense of congestion is motorist time lost because of delay, but stop-and-go traffic also wastes fuel. The cost of delay in U.S. urban areas, based on estimates of motorist value of time and wasted fuel, totaled $43 billion in 1990 (Shrank et at. 1993). The cost would rise even more if it included the increased air pollution from the emissions of idling and accelerating engines that accompany stop-and-go traffic. These figures also do not mea-

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion sure how congestion affects the cost of freight movements and how this, in turn, makes it more difficult for U.S. products to compete in world markets. As described later in more detail, traffic congestion in and around major metropolitan areas has persisted during the past two decades despite the expenditure of billions of dollars on urban freeways and public transportation systems. Nor have various forms of recent traffic demand management techniques offered substantial relief. The lack of success with both traditional and new methods, combined with fiscal restraints and environmental restrictions on highway expansion, has renewed interest in an old idea—congestion pricing. Congestion pricing could significantly reduce traffic congestion. Congestion pricing has a long history in the academic and professional literature and has been applied with success in Singapore since 1975. As discussed in Chapter 2 and Appendix B, it was possible to introduce congestion pricing swiftly and without controversy in Singapore in large part because the island state is not a Western-style democracy and is without the jurisdictional complexities characteristic of U. S. metropolitan regions. The pricing scheme itself is fairly simple. Drivers who wish to drive during the peak period are charged for the delays they impose on each other. When faced with a congestion fee, some drivers will decide that it is not worth it to drive (or drive alone) during the peak period. They may choose to drive at a different time, share a ride in a carpool, use transit, or make some other arrangements. Drivers willing to pay the fee will save time and the reduced congestion will reduce automobile emissions. Although congestion pricing increases out-of-pocket expenses and causes some commuters to change their behavior, society as a whole will benefit because of the resulting time savings. Congestion pricing, however, faces a considerable political challenge. Motorists are accustomed to traveling on roads without paying tolls. Many are concerned that congestion fees would be unfair to low-income drivers or to drivers who would not like to pay the fee but would have no other choice. When raised in the United States in the past, congestion pricing proposals were summarily dismissed. Despite its past lack of acceptance, congestion pricing is subject to renewed interest. Environmentalists increasingly see congestion pricing as a potential tool for meeting state and federal air quality standards, particularly the more stringent standards in place in California (Cameron 1991). Further impetus for congestion pricing —indeed for this study—is provided by the Intermodal Surface Transportation Efficiency Act of 1991

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion (ISTEA), which allows up to $25 million per year through 1997 to help fund up to five congestion pricing pilot projects. One congestion pricing pilot project was approved in 1993. Congestion pricing is also being reconsidered because of growing awareness of revenue shortfalls for capital investment from traditional transportation taxes and increased acceptance of toll financing (Small et al. 1989). For example, because of a lack of funds and an inability to respond to the demand for new facilities, the state of California is allowing seven new toll roads to be built, two of which are planning to rely on peak-period fees. IMPETUS FOR CONGESTION PRICING Congestion Motorists do not like congestion and believe that it is getting worse. A recent nationwide poll found that nearly two-thirds of central-city and metropolitan-area residents believe that congestion is a major problem (Apogee Research, Inc. 1990). Half of the respondents to this survey reported that congestion had become “a lot worse” compared with the situation five years ago. Data available on the use of specific facilities support this view. Although the capacity of major arterial highways increased 25 percent between 1980 and 1991, the volume of travel during that same period increased almost 60 percent. As a result, the percentage of travel on urban Interstates operating in or near congested conditions has increased considerably (Figure 1-1). (Other available trend data on congestion are reviewed in Appendix A.) Efficiency Economists have long advocated congestion pricing because it would use the existing transportation system more efficiently (Walters 1961; Vickrey 1959; Mohring 1965; Keeler and Small 1977; Hau 1992). Most metropolitan areas would have sufficient highway capacity if the daily use of the system could be averaged over the hours of the waking day. Highway use, however, like use of utilities, restaurants, seasonal resorts, and airlines, is characterized by considerable differences between peak and off-peak demand. Highways in most areas are typically congested during the morning and evening peak hours and underused the rest of the day. (Many urban

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion FIGURE 1-1 Percentage of peak-hour urban Interstate travel occurring in congested conditions (DOT 1992). (As defined in this figure, congestion occurs when traffic meets or exceeds a volume-to-service-flow ratio of 0.80. See Appendix A.) areas, however, are now also confronted by a midday peak, and some routes within metropolitan areas are congested throughout the day.) By shifting some of the demand away from peak periods, the traffic would flow much more smoothly during peak periods and the facility would be more efficiently used in the off peak. As well as easing congestion on an existing facility, congestion pricing would also maximize the efficiency of use. Although economists' espousal of congestion pricing has gone unheeded, one of their predictions has been borne out. When scarce and valued goods, like highway capacity, are given away, queues of people who want them will form. The nation has invested billions of dollars in the existing highway and transit system, often justified on the basis of reducing congestion (Altshuler 1979). Yet there is little evidence that urban traffic congestion has been eased. New construction alone will not significantly ease congestion in high-growth parts of the country because of changes in traffic behavior that

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion occur when new capacity is added (Downs 1962). When motorists perceive that congestion has lessened during the peak, they change the timing of trips or make trips they formerly did not make to take advantage of the new capacity. Some former carpoolers will revert to driving alone. This phenomenon is referred to as latent demand. In addition, motorists who formerly took alternate routes during the same time period will soon discover that the new capacity offers a quicker route, and they will shift to the new route. Before long, the latent demand congests the new capacity during the peak. Over the longer term, the provision of new capacity also stimulates additional residential and commercial development that brings new motorists onto the road. Although the new road will serve more vehicles than before and will save time for many commuters compared with their trip times before the new capacity, when the new capacity becomes congested, motorists become frustrated with the delays and the stop-and-go traffic increases air pollution. Congestion pricing is proposed as the only demand management technique—short of administrative rationing—that can keep latent demand from congesting new facilities (or recongesting other facilities after some other measure has helped alleviate the peak demand). Restrictions on Expanding Highway Capacity During the last four decades, the conventional response to congestion has been to increase capacity. However, both ISTEA and the Clean Air Act Amendments (CAAA) of 1990 contain strict prohibitions on the addition of new highway capacity in areas failing to meet federal air quality standards. As of October 1993, 41 areas were designated as being in nonattainment for carbon monoxide (CO), for which motor vehicles are responsible for 80 percent of emissions, and 94 areas were designated as being in nonattainment for ground-level ozone (EPA 1993). Instead of providing new capacity, those areas not in compliance with the CAAA must propose specific measures for reducing automobile travel through measures such as trip reduction ordinances, employer-based transportation management, transit improvements, pricing, traffic flow improvements, and parking management. Employers with more than 100 employees in the 10 metropolitan areas rated as in “severe” or “extreme” nonattainment are required to submit plans by 1994 that will result in reductions in the number of employees driving to work alone. An employee trip reduction program required under California law is already in

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion effect in Southern California. Early experience with California's employee trip reduction program indicates that such programs are unpopular with companies and at best result in modest traffic reductions in the region (Giuliano and Wachs 1992). The prospect that employee trip reduction programs and other traffic restraints would be imposed in the San Francisco Bay Area led business leaders to urge consideration of congestion pricing as a more palatable alternative (Bay Area Economic Forum 1990). Advances in Technology Congestion pricing was dismissed by some decision makers in the past partly because having motorists line up at toll booths to pay tolls would itself create congestion. This problem has given way to advances in automated toll collection. Some toll agencies in the United States are already collecting tolls electronically at considerable cost savings compared with the cost of manual and automatic toll booths. Computers at toll collection sites communicate with electronic tags in vehicles without requiring motorists to stop (Figure 1-2). These tags, some of which are the size of a credit card and about twice as thick, are placed on the dashboard or windshield. Clients can prepay for a period and have their accounts automatically debited with each use or can be billed for use on a monthly basis. FIGURE 1-2 Electronic toll collection.

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Toll agencies have set up procedures to protect the privacy of users; further advances in technology will enhance privacy even more (Pietrzyk, Vol. 2). Making the Automobile User Pay Congestion pricing, together with various fees or taxes on automobile use to reduce vehicle emissions, is being advocated by both business and environmental groups as a means of curbing growing automobile demand, reducing air pollution, and better balancing the benefits of automobile use with its social and environmental costs (Bay Area Economic Forum 1990; Cameron 1991). Most road users believe that they have paid for their road use through gasoline taxes. User taxes, however, cover only about 80 percent of total, direct roadway costs at the federal level and even less at the state and local levels (Small et al. 1989; DOT 1992). Direct roadway costs are defined to include maintenance of roads and roadway structures, construction, traffic police, street lighting, and other highway-related costs. The share of direct costs at the local level is much lower; in Wisconsin cities, for example, about half of the total direct cost of highway transportation is paid from local property taxes (Hanson 1990). Most automobile users also receive a parking subsidy in the form of employer-provided parking, which is a fringe benefit that is not subject to federal or state income tax (Shoup, Vol. 2). According to the Nationwide Personal Transportation Survey, almost all employees receive free parking, which encourages solo driving (Shoup, Vol. 2). Highway users also impose indirect costs on society, including air pollution, noise, traffic accidents, and the delays that users impose on one another during peak periods. Efforts to estimate the total indirect costs that highway users impose on society are usually controversial because of the difficulty of valuing environmental damage, pain and suffering, and other nonmonetary losses. Despite the controversy, few would dispute that these costs are substantial. Through strategies that could include tolls on roads or bridges, fees to enter congested areas, or changes in the structure of parking and transit pricing, congestion pricing would charge a premium to motorists who wish to drive on normally congested routes during peak travel periods. The subsidies to peak-period commuters have been characterized by the economist John Meyer as follows: Commuters going to work in major central business districts in the United States in their own motor vehicles directly pay for only about 25

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion percent of the total cost of their transport. The other 75 percent is typically borne by their employers (e.g., providing free parking), by others (in increased congestion, reduced safety, etc.), by fellow workers or residents (in air or noise pollution, etc.) and by governments. (Johnson 1993, 10–11) Supporters of congestion pricing and fees on automobile use believe that if highway users paid directly for more of the costs they impose, the demand for automobile use, or the negative impacts of automobile travel, would be reduced. RESISTANCE TO CONGESTION PRICING Road pricing, of which congestion pricing is a primary ingredient, has been a matter of policy debate in the United States before. During the expansionist period of highway construction following passage of the Federal Highway Revenue Act of 1956, it was discussed as an alternative approach for defining long-run investment needs and for solving the urban congestion problem, but was never acted upon. Following the passage of the Clean Air Act (CAA) of 1970 and the energy crisis of 1973, federal transportation policy shifted somewhat away from an emphasis on highway construction toward concern for achieving greater efficiency in urban transportation (Altshuler 1979). Federal funding for public transit increased and the transportation system management (TSM) concepts for increasing the efficiency of highway use came into vogue. Interest was further stimulated by the Environmental Protection Agency (EPA) transportation control plans for those urban areas that failed to meet the ambient air quality standards of the CAA. Congestion pricing was one of the major policy instruments considered during this period. For example, beginning in 1976, then-Secretary of Transportation William Coleman offered several cities federal funding if they would participate in studies of congestion pricing. Although subject to serious intellectual discussion, actual congestion pricing proposals were greeted by policy makers with skepticism if not downright hostility. The Bureau of Public Roads (forerunner of the Federal Highway Administration) rejected road pricing proposals as unworkable (St. Clair 1964). Congress prohibited the EPA from using areawide parking pricing, one approach to congestion pricing, when EPA moved toward this proposal in 1973. Although a few cities gave Secretary Coleman's invitation to study congestion pricing serious consideration, no

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion local government participated (Altshuler 1990; Higgins 1979, 1986). The mayors and council members who turned down Coleman's offer cited concern about the effect on low-income individuals, the reaction of users who had become accustomed to “free” highways, and adverse consequences for struggling downtown businesses. The reasons for rejection of congestion pricing in the past have not changed. Any shift from the current system of financing and using the transportation system toward more marketlike mechanisms can be expected to engender public and political resistance (Wachs 1992). Concern that the poor would be less able than the middle class or the rich to pay congestion fees is often held up as an important political barrier to the acceptance of congestion pricing. (The unwillingness of some in the middle class to pay higher out-of-pocket expenses may be the more salient political barrier.) New road use charges of any sort are widely viewed as new taxes by a citizenry that holds the government in low esteem. In addition, some commercial interests in congested areas that might be subject to congestion pricing may be more worried about the possible short-term costs than the possible long-term benefits. The political difficulties of congestion pricing have not gone away, but the forces in favor of congestion pricing have increased. Whereas local political leaders eschewed congestion pricing in the past, support is growing in some areas, particularly in California. Although congestion pricing proposals are proceeding in a small-scale, incremental fashion, that they are proceeding at all is a substantial change from this policy's fate when last seriously considered in the United States. OUTLINE OF REPORT Volume 1 is an overview of the papers contained in Volume 2 and a summary of the committee's view of the potential for congestion pricing in the United States. Chapter 2 provides a brief overview of the theory and definition of congestion pricing, experience abroad, and current proposals for the United States. Chapter 3 summarizes the best available estimates of how congestion pricing might affect travel, different groups of motorists, air quality, energy, and urban form. Chapter 4 provides an overview of the administrative and political barriers to congestion pricing and how they might be overcome. The design of congestion pricing pilot projects and importance of evaluating any proposals that might be implemented are

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion discussed in Chapter 5. The committee's conclusions are contained in Chapter 6. The appendixes contain more detailed material about some of the same issues covered in the report. This material is provided for readers interested in delving more deeply into available measures of traffic congestion (Appendix A) and the theory of congestion pricing and studies of its possible effects in the United States (Appendix B). Volume 2 contains the papers commissioned by the committee, most of which were presented and discussed at a symposium held in June 1993 at the National Academy of Sciences. Before publication, the authors revised their papers on the basis of the discussion. Taken together, the papers provide a rich array of information about individual case studies from around the nation and thoughtful analyses by individual scholars about many of the critical issues surrounding congestion pricing. REFERENCES ABBREVIATIONS DOT U.S. Department of Transportation EPA Environmental Protection Agency Apogee Research, Inc. 1990. The Road Information Program (TRIP) National Transportation Survey: 1990 Poll Results. Summary Report. Road Information Program, Washington, D.C. Altshuler, A. 1990. Discussion of C. Winston, How Efficient Is Current Infrastructure Spending and Pricing? In Is There a Shortfall in Public Capital Investment? Proceedings of a Conference Sponsored by the Federal Reserve Bank of Boston, Conference Series No. 34, pp. 206–213. Altshuler, A. 1979. Congestion. In The Urban Transportation System: Politics and Policy Innovation, Chap. 9, MIT Press, Cambridge, Mass. Bay Area Economic Forum. 1990. Market Based Solutions to the Transportation Crisis: Incentives to Clear the Air and Ease Congestion. San Francisco, Calif. Cameron, M. 1991. Transportation Efficiency: Tackling Southern California's Air Pollution and Congestion. Environmental Defense Fund, New York City; Regional Institute of Southern California, March. DOT. 1992. Highway Statistics, 1991. Federal Highway Administration. Downs, A. 1962. The Law of Peak-Hour Expressway Congestion. Traffic Quarterly, Vol. 16, July, pp. 393–409. EPA. 1993. National Air Quality Emissions Trends Report, 1992. Report EPA 454/R-93-031. Office of Air Quality Planning and Standards, Research Triangle Park, N.C. Giuliano, G., and M. Wachs. 1992. A Comparative Analysis of Regulatory and Market-Based Transportation Demand Management Strategies. In Papers

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CURBING GRIDLOCK: Peak-Period Fees To Relieve Traffic Congestion Presented at the Congestion Pricing Symposium, June 10–12, FHWA and FTA, U.S. Department of Transportation, pp. 6-1 to 6-15. Hanson, M. 1990. Automobile Subsidies and Land Use: Estimates and Policy Responses . Journal of the American Planning Association, Vol. 58, No. 1, pp. 60–71. Hau, T. 1992. An Economic Analysis of Road Pricing: A Diagrammatic Approach. Policy Research Working Papers. WPS 1070. The World Bank, Washington, D.C. Higgins, T. 1979. Road Pricing—Should and Might It Happen? Transportation, Vol. 8, pp. 99–113. Higgins, T. 1986. Road Pricing Attempts in the United States. Transportation Research, Vol. 20A, No. 2, pp. 145–150. Johnson, E. 1993. Avoiding the Collision of Cities and Cars: Urban Transportation Policy for the Twenty-First Century. The American Academy of Arts and Sciences, Cambridge, Mass. Keeler, T., and K. Small. 1977. Optimal Peak-Load Pricing, Investment, and Service Levels on Urban Expressways. Journal of Political Economy, Vol. 85, No. 1, pp. 1–25. Mohring, H. 1965. Urban Highway Investments. In Measuring Benefits of Government Investments (R. Dorfman, ed.), The Brookings Institution, Washington, D.C., pp. 231–275. Shrank, D., S. Turner, and T. Lomax. 1993. Estimates of Urban Roadway Congestion, 1990. Report 1131-5. Texas Transportation Institute, College Station. Small, K., C. Winston, and C. Evans. 1989. Road Work: A New Highway Pricing and Investment Policy. The Brookings Institution, Washington, D.C. St. Clair, G. 1964. Congestion Tolls—An Engineer's Viewpoint. In Highway Research Record 47, HRB, National Research Council, Washington, D.C. TRB. 1985. Special Report 209: Highway Capacity Manual. National Research Council, Washington, D.C. Vickrey, W. 1959. Statement on the Pricing of Urban Street Use. Joint Committee on Washington Metropolitan Problems, U.S. Congress . Hearings on the Transportation Plan for the National Capital Region . Nov. Wachs, M. 1992. Introductory Remarks. Presented at Symposium on the Role of Pricing and Market-Based Strategies , Lake Arrowhead, Calif., Sept. 7. Walters, A. 1961. The Theory and Measurement of Private and Social Cost of Highway Congestion.Econometrica, Vol. 29, No. 4, pp. 676–699.